Nile Conflict: Compensation Rather Than Mediation

Egypt under Pressure

Egypt relies almost entirely on the Nile for its water needs, providing over 90 percent of the nation’s water resources. Approxi­mately 86 percent of the Nile water that reaches the Aswan Dam originates in the Ethiopian highlands. However, Ethiopia has so far been unable to take advantage of its favourable geostrategic position as an up­stream riparian state. In the past, a lack of financial resources and an unstable politi­cal situation prevented the expansion of the water infrastructure in Ethiopia.

In light of this, successive governments in Cairo have always insisted on the status quo of water distribution. In doing so, they relied primarily on colonial treaties: firstly, an agreement of 1929 with the colonial power Great Britain, which granted Egypt a veto right against water projects on the upper reaches; and secondly, an agreement with Sudan of 1959, which divided the Nile water resources between the two countries, and guaranteed Egypt 55.5 billion cubic metres annually and Sudan 18.5 billion cubic metres. Cairo ignores the fact that these contracts were negotiated without Ethiopia.

The construction of the GERD has fundamentally changed the balance of power on the Nile. Adherence to the old water contracts no longer offers Egypt any pro­tec­tion against restrictions on its own water supply. Recurrent threats from Cairo to stop the dam construction project by military means if necessary are rather improbable, not least because of the distance between the two countries. To date, efforts to exert pressure on Ethiopia via the mobilisation of allied states have also been unsuccessful. The USA and the Europeans, but also the Gulf States and the People’s Republic of China, maintain good relations with both countries; they are evidently unwilling to take sides in the water conflict.

It is unlikely that the Ethiopian leadership will compromise on its own initiative, given the national dimension of the project. At the end of 2019, about 70 percent of the construction work had been completed, such that filling can begin in 2020 and full operation seems viable – depending on the filling timeframe – in 2025. Currently, a large section of the Ethiopian population has no access to electricity. The construc­tion of the GERD is therefore of similar importance to Ethiopia as the Aswan Dam was for Egypt: it is not just an infrastructure project, but a project of the century, which should pave the way for the mod­erni­sation of the country. Further delays in its implementation, or a drastic reduction in the size of the project, can hardly be jus­ti­fied by the Ethiopian government to its own population. Prime Minister Abiy Ahmed’s visit to the GERD on 1 February 2020 was highly symbolic, just one day after another round of fruitless negotiations.

Negotiations on the filling of the reser­voir are at an impasse – but with clear advantages for Ethiopia. In the event of new delays, the government in Addis Ababa could initiate a rapid filling, which could cause a dramatic water shortage in Egypt, and perhaps even impact on energy pro­­duction (see Map). In order to avert such a scenario, the European states in particular could offer an alternative approach. After all, Egypt’s security of supply and Ethiopia’s development are central to the stability of the entire region, home to over 250 million people. A lack of development opportuni­ties and water shortages could have serious consequences for Europe, including increas­ing migration pressure. If no agreement can be reached, Germany and its European part­ners should offer alternative solutions to revitalise the negotiations.

A Compensation Mechanism

A renewed attempt to resolve the Nile water conflict by external actors can no longer be limited to facilitating negotiations between the conflict parties. This approach has prov­en ineffective, not only because the Trump administration’s initiative has so far failed to make a breakthrough. The Nile Basin Initiative (NBI), which was created in 1999 and is supported to a large extent by Euro­pean countries, has also not been particu­larly successful. Its objective was to bring the Nile riparians around the negotiating table and, in parallel, to promote technical cooperation on the use of resources. The political and legal issues of water distribu­tion and use remained unresolved despite the NBI. In the current stalemate, Euro­peans should present their own proposal that fundamentally recognises Ethiopia’s increased negotiating power. Unlike in the past, negotiations under European leader­ship should not concentrate on distribution quotas, but on how and in what form Egypt can alleviate the negative consequences for Ethiopia of the slow filling of the reservoir.

One option would be to develop a compensation mechanism between the two countries. It would need to stipulate that Egypt compensates Ethiopia for the eco­nomic disadvantages resulting from a slower filling process. The basis for calcu­lating the opportunity costs that Ethiopia would incur could be twofold: the financial value of the electricity Ethiopia was not able to generate and its corresponding eco­nomic benefits. Since the data situation is ambiguous, the determination of these oppor­tunity costs could not be a purely tech­nical process, but ultimately the result of political negotiations, which could be guided by Germany and its European part­ners. Furthermore, the Gulf monarchies, as the most important partners of the three Nile states affected, should be included in the negotiations. They would benefit from peaceful and sustainable conflict resolution, since they have invested heavily in the Nile basin, especially in the agricultural sector.

In view of possible climate variability, such a mechanism would offer flexibility in filling the reservoir. In rainy years, Ethio­pia could retain more water than initially agreed, which would reduce compensation payments. Conversely, the mechanism could be used to compensate the country in peri­ods of drought if it passed on more water to Egypt than originally agreed. If such a compensation mechanism for the filling phase could be worked out, the rules and principles could also be used in the future to control the water volume at the dam.

The financing of such a mechanism would have to be provided by Egypt. Al­though under international law the country is entitled to an equitable and fair share of the Nile waters, a quota system in accord­ance with Egypt’s position would be vir­tually impossible to implement in law and in practice. Due to the state’s drained finances, Cairo is hardly in a position to finance such a mechanism on its own – the Europeans would have to get involved.

The Conditions for European Engagement

The Europeans should, however, make their contributions to such a compensation mecha­nism, and thus their support for Egypt, subject to conditions aimed at a com­prehensive solution to the water crisis. The conflict over the GERD and the use of the Nile waters is already taking place in the context of an acute water emergency in Egypt (see Map). Even without filling the GERD reservoir, the country will reach the threshold of absolute water scarcity in 2025, according to United Nations (UN) estimates. Considerable population growth is contributing to this, as is mismanagement in the water sector and the misallo­cation of public funds. Yet Egypt under President Sisi has become the world’s third largest importer of weapons and is pushing ahead with resource-intensive prestige proj­ects – such as a new capital in the desert (at least $45 billion) or the construction of a nuclear power plant (approx. $25 billion); meanwhile government investment in water management has been neglected. Major sea­water desalination projects, for example, did not begin to take shape until 2017.

Thus Germany and its European part­ners should tie their financial contributions with­in the framework of the compensation solution to the following conditions. They would have to demand a reorientation of Egypt’s state spending policy, which should no longer be oriented towards authoritarian logic. To achieve such a reorientation, po­lit­i­cal reforms towards better governance and accountability would be indispensable. Ethio­pia would have to commit itself to re­act­ing flexibly in the case of extreme droughts during the mutually agreed time­frame of filling the reservoir.